Deutsche Bank’s China A Shares ETF to Launch With $108M

By Brendan Conway

Investors can debate whether they truly need an ETF just for China’s domestic ‘A Share’ stock market. What can’t be debated is that a rush of early demand is being triggered now that fund companies are offering the chance.

A spokesman for Deutsche Wealth & Asset Management tells Barron’s that db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) will launch with some $108 million in investor assets when it debuts this morning on NYSE Arca. The firm says this would make the largest cash pile for any new equity ETF since 2007. Goldman Sachs is the market maker for the ETF, according to Deutsche.

Among other developments this morning, Van Eck Associates just took its own step toward direct ownership of A shares. The company said it is in talks with an unnamed Chinese subadvisor for that purpose. The firm’s Market Vectors China ETF (PEK) has used derivatives to get exposure to China’s domestic stocks.

But if you’re of a more tactical bent, it’s going to be a while before these A shares make their way into MSCI Emerging Markets Index and other widely followed benchmarks.

Just realize what you’re getting. Foreign investors are few and far between in China’s A shares, which reflect the ebb and flow of domestic Chinese investor sentiment. Your other ETFs are going to be more attuned with international investors.

Also, it’s a more volatile ride than you may be used to. The attached chart shows how much farther China CSI 300 Index (blue) soared in 2007 and crashed in 2008 than iShares China Large-Cap ETF (FXI, yellow).

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As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.